Adjusted Gross Margin

Adjusted Gross Margin

A calculation used to determine the profitability of a product, product line or company. The adjusted gross margin includes the cost of carrying inventory, whereas the gross margin calculation does not take this into consideration. The adjusted gross margin, therefore, provides a more accurate look at the profitability of a product than the gross margin allows. The equation is as follows:

n Period Gross Profit Dollars – n Period Carrying Cost Dollars
n Period Sales Dollars

Adjusted gross margin goes one step further than gross margin because it includes these inventory carrying costs, which greatly affect the bottom line of a product’s profitability. For example, two products could have identical, 25% gross margins. Each, however, could have different associated inventory carrying costs. Once these factors are included, the two products could show significantly different margins and profitability. This can help identify products and lines that are underperforming.

Inventory carrying costs include:
-Receiving and transferring inventory
-Insurance and taxes
-Warehouse rent and utilities
-Inventory shrinkage
-Opportunity cost


Investment dictionary. . 2012.

Игры ⚽ Нужно сделать НИР?

Look at other dictionaries:

  • margin — The edge or border; the edge of a body of water where it meets the land. As applied to a boundary line of land, the margin of a river, creek, or other watercourse means the center of the stream. But in the case of a lake, bay, or natural pond,… …   Black's law dictionary

  • margin — The edge or border; the edge of a body of water where it meets the land. As applied to a boundary line of land, the margin of a river, creek, or other watercourse means the center of the stream. But in the case of a lake, bay, or natural pond,… …   Black's law dictionary

  • Gross Processing Margin - GPM — The difference between the cost of a raw commodity and the income it generates once sold as a finished product. The gross processing margin will be adjusted for each different commodity. For example, the GPM for oil is called the crack spread;… …   Investment dictionary

  • Mexico — /mek si koh /, n. 1. a republic in S North America. 97,563,374; 761,530 sq. mi. (1,972,363 sq. km). Cap.: Mexico City. 2. a state in central Mexico. 6,245,000; 8268 sq. mi. (21,415 sq. km). Cap.: Toluca. 3. Gulf of, Mexican, Golfo de México /gawl …   Universalium

  • Financial ratio — Corporate finance …   Wikipedia

  • Patient Protection and Affordable Care Act — Full title The Patient Protection and Affordable Care Act. Acronym PPACA Colloquial name(s) Affordable Care Act, Healthcare Insurance Reform, Obamacare, Healthcare Reform Enacted by the …   Wikipedia

  • West Virginia — This article is about the U.S. state of West Virginia. For other uses, see West Virginia (disambiguation). State of West Virginia …   Wikipedia

  • Interest Deduction — A deduction for taxpayers who pay certain types of interest. Interest deductions reduce the amount of income subject to tax. The two main types of interest deductions are for home mortgage and home equity loan interest, and margin account… …   Investment dictionary

  • Morris County, New Jersey — Location in the state of New Jersey …   Wikipedia

  • Somerset County, New Jersey — Infobox U.S. County county = Somerset County state = New Jersey map size = 100 founded = May 14, 1688 seat = Somerville area total sq mi =305 area land sq mi =305 area water sq mi =0 area percentage = 0.12% census yr = 2000 pop = 297490 density… …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”